Due to precautions related to COVID-19, we have expanded our options for remote consultations. Please contact our office to discuss whether a full phone consultation or video conference is appropriate for your situation.

Minnesota and Wisconsin pass new nexus tax law

A recent decision from the Supreme Court of the United States (SCOTUS) has changed how state’s view online transactions. In the past, the only way a state could impose a tax on sales was to essentially establish that the business had a physical presence within the state. The evolution of online transactions led to a challenge.

A quick review: South Dakota challenges tax collection rules for online transactions. South Dakota passed a law that allowed for the collection of state taxes on online transactions—even when the business did not have a physical presence within the state. Wayfair challenged this law and the case made it to SCOTUS.

Ultimately, SCOTUS decided the law could stand. This has led to other states passing similar laws.

Minnesota and Wisconsin join in: The basics of the new tax law. Minnesota and Wisconsin are two of ten states to pass a new economic nexus law. The law, which went into effect October 1, 2018, is similar to the law used in South Dakota. South Dakota’s economic nexus law came into national attention when it won a battle in the Supreme Court. The other states include Alabama, Illinois, Indiana, Kentucky, Maryland, Michigan, North Dakota and Washington.

Essentially, this law changes the requirements needed for a state to demand tax payments from businesses conducting online transactions.

The law has two key provisions:

  • Financial gain. In order for a state to collect the tax, the business must conduct at least $100,000 in sales in the state.  
  • Number of transactions. A business must conduct 200 or more transactions for the tax to apply.

Will the laws succeed? Critics state that the laws could face legal challenges. One of the main issues: these states are much larger than South Dakota. As such, it may not be proper for larger states to use the same threshold. Regardless, the passage of this law means businesses will face new tax challenges.

Findlaw Network

Archives

Office Location

Edina Tax Law Office
Pridgeon & Zoss, PLLC
7301 Ohms Lane, Suite 420
Edina, MN 55439

Telephone: 952-835-8320
Fax: 952-835-0201
Edina Law Office Map

St. Anthony Tax Law Office
Pridgeon & Zoss, PLLC
2812 Anthony Lane South, Suite 200
St. Anthony, Minnesota 55418

Telephone: 612-455-8948
Fax: 612-788-9879
Map & Direction

column-side-img